Is Virtus KAR Small Cap Sustain Growth A (PSGAX) a Strong Mutual Fund Pick Right Now?

There are plenty of choices in the Small Cap Growth category, but where should you start your research? Well, one fund that may not be worth investigating is Virtus KAR Small Cap Sustain Growth A (PSGAX). PSGAX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

The world of Small Cap Growth funds is an area filled with options, such as PSGAX. These funds tend to create their portfolios around stocks that sport large growth opportunities and market capitalization of less than $2 billion. The companies in these portfolios are usually on the smaller side, and are in up-and-coming industries and markets.

History of Fund/Manager

Virtus Funds is based in Hartford, CT, and is the manager of PSGAX. Virtus KAR Small Cap Sustain Growth A made its debut in June of 2006, and since then, PSGAX has accumulated about $305.61 million in assets, per the most up-to-date date available. The fund is currently managed by Todd Beiley who has been in charge of the fund since April of 2008.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 0.39%, and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 0.68%, which places it in the bottom third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, PSGAX's standard deviation comes in at 21.62%, compared to the category average of 15.87%. The standard deviation of the fund over the past 5 years is 20.09% compared to the category average of 15.45%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PSGAX has a 5-year beta of 0.93, which means it is likely to be less volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. With a negative alpha of -12.02, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, PSGAX is a load fund. It has an expense ratio of 1.37% compared to the category average of 1.00%. So, PSGAX is actually more expensive than its peers from a cost perspective.

Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $100.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, Virtus KAR Small Cap Sustain Growth A ( PSGAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and higher fees, Virtus KAR Small Cap Sustain Growth A ( PSGAX ) looks like a somewhat weak choice for investors right now.

Want even more information about PSGAX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.

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